An Attrition rate Project Report

If employees are to be products,their shelf-lives aregetting shorter

In the best of worlds, employees would love their jobs, like theircoworkers, work hard for their employers, get paid well for their work,have ample chances for advancement, and flexible schedules so theycould attend to personal or family needs when necessary. And never leave.But then there's the real world. And in the real world, employees, do leave, either because they want more money, hate the workingconditions, hate their coworkers, want a change, or because their spouse gets a dream job in another state. So, what does all that turnover cost? And what employees are likely to have the highestturnover? Who is likely to stay the longest? Defining Attrition: "A reduction in the number of employees throughretirement, resignation or death" Defining Attrition rate: "the rate of shrinkage in size or number"

Attrition is beginning to significantly affect offshore ROI. Just asbusinesses faced a scarcity of talented IT resources during the dotcomera, organizations in offshore countries such as India are experiencingsimilar pains. Skilled employees are hopping from job to job and takingwith them the customer knowledge and technical expertise that anycompany needs. Their salaries are increasing, along with their perks,benefits, and bonuses. Defining the attrition problem Global outsourcing and the astounding amount of foreign directinvestment pouring into China, Russia, and India have createdtremendous opportunities and competition for talented IT professionalsin those countries. The downside of this increased competition is arising rate of attrition, particularly in India. Fiscal third-quarter 2005(ended December 2004) results filed by Infosys, Wipro, Satyam, and TCS listed attrition rates between 7.6% and 17.7%. Vendors that wehave interviewed place the numbers much higher, at 25%60%, whilean April 2005 BusinessWeek article estimated an attrition rate of 60%,with some India service providers experiencing up to 80% turnover. To put these attrition numbers into perspective, if a company has 100programmers and an attrition rate of 25%, then 25 of its IT staff

willleave each year. Think about the time and money it took to find,interview, hire, train, and coach those 25 people. Now think aboutlosing them and starting the hiring and training processes anew.How do the hiring and training processes break down in terms of totalcosts in India? The typical time for advertising, interviewing, screening,negotiating, and hiring a new employee is about two weeks.Companies usually allot one week for programmers to become familiar _______________________________________________________________________ _ 2 with the new business, two more weeks for technical training, and onelast week for customer training. Now imagine a 25% attrition rate andreplacing 25 of these programmers each year. Based on a yearly salaryof $15,000 for the human resource person and $25,000 for theprogrammer, it would cost an additional $63,000 annually inacquisition and employee training costs. After considering thesefigures, it quickly becomes apparent why companies are investing instrategies to prevent attrition. Reasons for attrition It is not easy to find out as to who contributes and who has the controlon the attrition of employees. Various studies/survey conductedindicates that every one is contributing to the prevailing attrition.Attrition does not happen for one or two reasons. The way the industryis projected and speed at which the companies are expanding has amajor part in attrition.For a moment if we look back, did we plan for the growth of thisindustry and answer will be no. The readiness in all aspects will easethe problems to some extent. In our country we start the industry andthen develop the infrastructure. All the major IT companies have facedthese realities. If you look within, the specific reasons for attrition arevaried in nature and it is interesting to know why the people change jobs so quickly. Even today, the main reason for changing jobs is forhigher salary and better benefits. But in call centers the reasons aremany and it is also true that for funny reasons people change jobs. Atthe same time the attrition cannot be attributed to employees alone. Organizational matters: _______________________________________________________________________ _ 3 The employees always assess the management values, work culture,work practices and credibility of the organization. The Indiancompanies do have difficulties in getting the businesses and retain itfor a long time. There are always ups and downs in the business. Whenthere is no focus and in the absence of business plans, non-availabilityof the campaigns makes people to quickly move out of theorganization. Working environment: Working environment is the most important cause of attrition.Employees expect very professional approach and internationalworking environment. They expect very friendly and learningenvironment. It

means bossism; rigid rules and stick approach will notsuit the call center. Employees look for freedom, good treatment fromthe superiors, good encouragement, friendly approach from one andall, and good motivation. Job matters: No doubt the jobs today bring lots of pressure and stress is high. Theemployees leave the job if there is too much pressure on performanceor any work related pressure. It is quite common that employees aremoved from one process to another. They take time to get adjustedwith the new campaigns and few employees find it difficult to getadjusted and they leave immediately. Monotony sets in very quicklyand this is one of the main reasons for attrition. Youngsters look jobs _______________________________________________________________________ _ 4 as being temporary and they quickly change the job once they get into their own field. The other option is to move to such other processwork where there is no pressure of sales and meeting service levelagreements (SLA). The employees move out if there are strainedrelations with the superiors or with the subordinates or any slightestdiscontent. Salary and other benefits: Moving from one job to another for higher salary, better positions andbetter benefits are the most important reasons for attrition. The salaryand offered from MNC companies in Bangalore, Delhi and Mumbai havegone up very high (Rs 15000 to Rs 18000 per month) and it is highlyimpossible for Indian companies to meet the expectation of theemployees. The employees expect salary revision once in 4-6 monthsand if not they move to other organizations. Personal reasons: The personal reasons are many and only few are visible to us. Theforemost personal reasons are getting married or falling in love orchange of place. The next important personal reason is going forhigher education. Most of the BE, MCA and others appear for GATEexamination or other examinations and once they get cleared theyquickly move out.Health is another aspect, which contributes for attrition. Employees doget affected with health problems like sleep disturbances, indigestion,headache, throat infection and gynecological dysfunction for ladyemployees. Employees who have allergic problems and unable to cope _______________________________________________________________________ _ 5 with the AC hall etc will tend to get various other health problems andloose interest to work.

 Poaching: The demand for trained and competent manpower is very high.Poaching has become very common. The big companies targetemployees of small companies. The placement agencies have gooddays for doing more business. The employees with 4-6 months experience have very good confidenceand dare to walk out and get a better job in a week's time. Most of theorganizations have employee referral schemes and this makes peopleto spread message and refer the know candidates from the previouscompanies and earn too. Employees advocate: One of the main reasons why employees leave companies isbecause of problems with their managers. An HR professional can betermed an employees advocate and a bridge between topmanagement and employees at all levels. There is a huge gap betweenHR professionals and employees in terms of understanding challengesand delivering requirements. HR has not really understood theproblems associated with employees careers and jobs. The companysoverall plans and strategies also depend on HR professionals as theyvoice employees problems and requirements. The HR departmentshould have genuine interest in the employees welfareit isresponsible for making sure that their expectations are met. By doingthis it is easier to meet the companys business targets. _______________________________________________________________________ _ 6 Handling attrition? Earlier the retention was the sole responsibility of HR Department andat the most the department heads will be accountable for the retentionof talent. In companies the wheels have changed and multidimensional approach needs to be adopted. More of concerted effortsonly would help to retain the talent. Everyone has to contribute to holdthe employees little longer period. All the leading companies are tryingseveral methods to retain the talent and few of those innovative HRpractices are: (based on a survey) Providing stimulating work environment: _______________________________________________________________________ _ 7 In terms of stated work pressure, only 17% have claimed lightpressure. This may point to a reasonably high-pressure environment inconventional terms, not realized as most respondents have no otherindustry experience. The atmosphere at the workplace however, wasgenerally positive. Almost half worked more than 45 hours per week.

 Free transport and free food: Majority of the breaks were for meals and there were no significantproblems faced in taking the breaks. _______________________________________________________________________ _ 8 Almost 2/3rd employees travel more than 10 kms to work everyday. This is a huge strain on quality time available with the family andostensibly results in stress in numerous ways compared with otherindustries. The root cause is that most BPOs are located outside thecity as government lands have been allocated to the MNCs at betterrates there. _______________________________________________________________________ _ 9 Although taxi / bus services are provided by most employers, as manyas 30% workers travel crammed (more than 5 persons to a taxi).Whats more, 79% waste more than 30 minutes of their productivelives everyday waiting for commute. Interestingly, lower salary workersget no such benefits. Good rewards and recognition programmes: As many as 56% admitted to being asked to work overtime. 44%refused the question implying that conditions are created such that allprobably are coerced into working overtime. The oppressive part wasfurther that as high as 41% claimed to not having been paid forovertime. Recreation clubs, Canteens, Entertain programmes , funactivities with in the work area: Many companies have canteens though the quality of food is not great. _______________________________________________________________________ _ 10 Good pay and benefits: A huge 58% of starters are dissatisfied with their promised packagesvis--vis delivered salary. _______________________________________________________________________ _ 11 Other practices include: - Promotions and salary increase on a regular basis.- Better learning opportunities, Encourage enroll for distance learningprogrammes.- Regular holiday packages, gifts, outings etc

. All the above activities are being undertaken to a greater extent orlittle more in all large Companies. Surprisingly the attrition rate is notcoming down in any of the companies, but it is going up and it mayincrease in the coming days. This is a time to introspect as to what islacking in the approach. One thing is missing is attention to individualneeds. Employees have varied expectations and it is becoming difficultto understand them and by the time you make an attempt tounderstand the expectation changes and it is still becoming difficult tomeet the customized demands or expectations. To quote an example,if a friend leaves, another close friend will also leave and he will lure _______________________________________________________________________ _ 12 another 3-5 persons. Moving for higher education and marriage are themajor reasons for attrition. To tackle these will be impossible with anytype of strategies and approaches. The HR personnel have becomesilent spectators and start hunting for new personnel to replace. The broader approach is to bring sanctity in the recruitment processlike demand the relieving letter from the previous company, have non-hire agreements with the companies in the particular area. It is noteasy to bring the entire company under a forum. Nasscom hasattempted to bring out certain guidelines on the matter and the impactis not felt yet. The MNC culture, high salary level and benefits offeredby them are the only two major aspect of attrition and no one can haltthem doing so. How Insights Can Help Build Strong Manager/EmployeeRelationships: The Insights Discovery System is based on perspectives and attitudesrelevant to understanding organizational and cultural requirementsand needs of people in relation to motivation and leadership. Theunderstanding of individual differences that Insights provides isfundamental to improving communication, co-operation and buildingeffective and high morale teams. This understanding is what bridgesthe gap between manager and employee. The Insights Discovery System generates reports that reveal personalpreferences or triggers of each individual - including issues that causestress. In essence, Insights can bring about a closer relationshipbetween employee and manager to enable both parties to betteradapt, connect and understand one another. _______________________________________________________________________ _ 13 An employee may be highly competent but his or her style may bedifferent from that of the direct manager. The "Value to a Team"section of an Insights report provides crucial information to a managerwho tends to evaluate all employees against one set of standards.Insights can help managers recognize the value and uniqueness of each person's contributions then reward them accordingly.Insights also serve as a communication vehicle for discussions aboutan employee's current and future interests. Insights help managersand employees better identify what values (needs) are most importantto each individual and how these values impact the person's attitudetowards work. Values can range from an employee feeling stable andsecure to someone enjoying challenge. The Insights Discovery

System is a powerful workforce enhancementtool. It can:- Enhance the effectiveness, commitment and retention of anincumbent workforce though increased understanding of humanbehavior- Motivate and retain employees whose basic monetary and materialneeds may have been satisfied, but who are seeking their internaldrives- Improve HR planning and development- Identify motivational and managerial issues related to interpersonalstyle- Reduce the impact of turbulence and organizational transition onemployee commitment and productivity. _______________________________________________________________________ _ 14 How to save high attrition rates? How much would you invest to keep your employees focusedand happy? This is the question on the minds of CEOs and managers worldwide asthe technology boom lifts and the employment market opens.From the employer's perspective, employees are an investment. Youinterview to make sure an individual has good work ethic, motivation,and drive. Most of the time, employees are considered a financialinvestment. Yet there's much more to it than that. There is asignificant emotional investment that is crucial to acceleratingbusiness strategies and reaching organizational goals. You probably know someone who owns an outdated, overused vehiclebut won't entertain the thought of trading it in even though they canafford to upgrade. Why, you might ask, do they keep it? Well, theowner has probably invested substantial time, money and care intokeeping it in top condition, not to mention the dependability that hastaken them to countless doctors appointments, baseball practices andevents. It seems senseless to throw it away. The cost of replacing thevehicle would be enormous compared to the cost of upkeep on the oldone. Even with inanimate objects, we become accustomed topersonality and quirks and develop a common trust. _______________________________________________________________________ _ 15 When this same logic is applied to employees, we find the cost of replacing employees comparable to that of investing in a newautomobile. Recruitment, hiring, benefits and administrative costs putan organization upside down on the investment. Thankfully, companies have come to realize that keeping employees ismore cost-effective than replacing them. Retaining valuable employeeshas other benefits retaining the vault of knowledge that's beenaccumulated, skills learned and trust and relationships they have builtwith customers and co-workers. People Are Not Easily Replaced Even though today's pool of unemployed workers is deep,organizations choose to spend more time and resources on retainingexisting employees than starting from scratch. Yes, there are financialreasons behind this focus on retention. However, there are many othercontributing factors such as the effect attrition has on customerservice, corporate culture and employee morale and loyalty. All thesefactors

can and will be effected by turnover. Basically, when goodpeople leave an organization they take their training and knowledgeand often times, relationships with them. Drivers of Turnover Turnover is often driven by corporate restructuring and tightcompetition for key talent. For many firms, surprise employeedepartures can have a significant effect on the execution of businessplans and may eventually cause a parallel decline in productivity. This _______________________________________________________________________ _ 16 phenomenon is especially true in light of current economic uncertaintyand following corporate downsizing when the impact of losing criticalemployees increases exponentially.When managers or supervisors are asked why good people leave, mostrespond, "Its about money." Or, they dismiss the departure matter-of-factly by stating the employee "received a better offer." Contrary topopular belief, research indicates that money is not even on the list of top five reasons employees give when asked why they are leaving anorganization.When viewed from the employees' perspective, a healthy organizationis one in which people are generally satisfied with the quality of theirwork life. On most days they feel good about going to work. They feelempowered to help shape decisions that affect them, they have theresources and skills to satisfy customer needs and they are generallyconfident in the abilities of the leadership team.From the organization's perspective, the organization is healthy if it isviable as measured by profitability, competitive market position andcustomer satisfaction. A healthy organization also responds well to theneed for change; it is adaptive and thereby ensures its future -meaning that following a major upheaval or transition, the healthyorganization rebounds and employees remain committed.Bottom line, it is the role of the manager, that most influences anemployee's decision to stay or depart from an organization. People willleave if they don't like their manager - even when they are well paid,receive recognition and have a chance to learn and grow. In fact,disliking or not respecting the boss is the primary reason for talent _______________________________________________________________________ _ 17 loss. Research shows the reasons for employee departures are (indescending order):1.Employee/manager relationship2.Inability to use core skills3.Not able to impact the organization's goals, mission4.Frequent reorganizations; lack of control over career5.Inability to grow and develop6.Employee/organization values misalignment7.Lack of resources to do the job8.Unclear expectations9.Lack of flexibility; no 'whole life balance'10.Salary/benefitsIt is very important to know that the above factors are often NOT theones mentioned in most attrition studies published by individualorganizations. Additionally, this information does not match the datafrequently obtained during an employee's exit interview when askedabout the reasons for departing. The rationale behind this discrepancyis that exit interviews are frequently conducted by the departingemployee's manager or HR manager, hindering honest responses. Typically, employees are hesitant to tell these companyrepresentatives the truth for fear of burning bridges or getting a badreference.

_______________________________________________________________________ _ 18 How to curb attrition? Money is not everything Although the importance of higher packages is slowly diminishing,among fresher or laterals with less than three years of workexperience, money is still considered to be the highest priority.Employees want not only work recognition, but also extra perks." Anumber of professionals are looking at more challenging jobs. "Inseveral cases, faced with a choice between more money and achallenging job, employees have opted for the latter as it allows themto learn new technology and increase domain expertise." Peopleanalyze the training programmes of prospective companies with thoseof their current organization, which means that how an organizationgrooms an employee is weighed to a greater extent. This is becausethey know that developing next-level skills will keep them ahead in the job market, and finally result in better compensation. They also look fora job with higher levels of responsibility, better learning opportunities. Vision and objectives The next level of communication, a crucial part of retention,starts with acquainting employees with the companys vision andobjectives. Organizations successful in retaining employees clearlypass on their goals and achievements. Conducting regular meetingsand updating employees, especially new entrants, about thecompanys status and achievements is a must. They shouldconcentrate on leadership and brand building as people prefer to beassociated with a brand. Respect for the job should be created byBPOs. The youth should feel proud to be a part of the billion-dollarindustry.Mentoring and handholding new recruits from day one to four monthsare important tasks; during this period, they should be familiarizedwith the culture of the company. It is at this time that new entrantsexperiment with different options. Hence they should be exposed tothe best values the company has. If they are informed about regularhappenings in the company, employees will be confident about thefuture and not try to look for better options. Treat employees like Customers Even while companies strive to understand which organizational, job,and reward factors will contribute to holding back employees, industryexperts have found several loopholes at the top management and HRmanagement level. Companies should have a similar approach toemployees and customers. If a company strives to retain an employeein the same way it tries to retain a customer, him leaving theorganization could be out of question.

_______________________________________________________________________ _ 20 Since software professionals have different priorities at different pointsof time, organizations need to structure their offer-mix while recruitingnew hires, as well as promoting potential ones. Communication is thefoundation for the entire process of managing attrition. Thiscommunication begins right from recruitment. In cases of peerpressure, an employee aims to join a well-known company. This couldbe achieved by brand building, which attracts the right talent andhelps in retention as well.Understanding an employees needs at various levels is arecommended HR practice. Firing Sometimes, firing can look like attrition. Looking at firing and attritiontogether in a different light, firing can be an excellent tool to containattrition. Attrition can simply be defined as employee leaving hiscurrent job due to reasons like, job pressure, health problems, personalreasons, inefficient boss, lack of job security etc. All the above reasonsare interlinked and can be the reasons for good workers to quit. If theteam has under-performers who despite given sufficient support andtraining is unable to perform, but they continue to be part of the teamdamage the morale of the team. A performer will not want to be part of the team, which has non-performers because he will have tocompensate for the nonperformer, thereby increasing his joboutput/pressure. A continuous job pressure results in health problems.Having frequent health problems not only reduces his performance,but also affects him financially. At this juncture, the performer realizes _______________________________________________________________________ _ 21 that he is working with an inefficient manager who is not capable of cleaning up the team by firing non-performers. With the above, theperformer employee feels insecure and resigns. Firing nonperformerscan be an efficient tool to contain attrition. Consider feedback It is important to take feedback from employees through differentmeans and work with the HR department to iron out differences. Asindustry experts point out, feedback can be got in two ways duringthe employees tenure, and through exit interviews. Inputs can besecured from existing employees through various employeerelationship management tools. The Wipro Listens and Respondsinitiative at Wipro aims to capture the concerns and grievances of itsemployees. The feedback we get through this tool will be analyzed,and action will be taken on it. Our employees are very excited thattheir feedback is being taken seriously, says Sahoo. Exit interviewshelp management learn the reasons why employees leave thecompany; based on their revelations, the organization can address theproblems of existing employees, thereby curb attrition.

Spend Time Developing and Benchmarking Incentives Whenever the demand for a professional in a particular field heats up,the perks associated with the job start to pile up. Standard perks for anIndia-based "fresher" (a new entrant in the IT services industry withlittle work experience) typically include free transportation, educationalassistance, healthcare benefits, performance-based bonuses, onsitecafeteria, stock options, and interest-free loans to absorb the cost of relocation or maybe to finance the purchase of a two-wheeler. _______________________________________________________________________ _ 22 According to Wipro's web site, its employees even have access to anagency that will handle such "domestic chores" as paying bills, therebygiving IT workers more free time.An important part of designing incentives is aligning them with marketbenchmarks. As far as salaries, HR firm Hewitt Associates reports thatIndia showed the largest overall salary increase in the Asia-Pacificregion in 2004. Salaries in India grew by 11.6% overall, while Chinatrailed with a 6.4%8.4% hike, the Philippines showed a 7.4%7.7%increase, and Korea saw wages jump by 6.4%6.8%. Salary increasesfor middle managers in India were even more dramatic: Nasscom,India's software association found that salaries for middle managersrose by as much as 30% in the last two years. These salaries are oftenpaired with expansive benefit packages that include standard entry-level benefits as well as special services such as help finding andbuying a home or enrolling children in school.Captive centers and IT service providers have to offer innovativecompensation and benefitsor risk losing valued employees tocompetitors. Nonstop evaluation and benchmarking are "need to do"activities for IT managers. Subsidize Education and Certification In the United States, many companies reimburse employees foradvanced degrees or certifications that relate to their area of expertise. Until recently, the opposite was true in India, but that trendhas begun to change as businesses have discovered that a significantportion of their attrition problems stem from employees leaving topursue a master's degree. Several offshore service providers have _______________________________________________________________________ _ 23 teamed with universities to offer their workers management-levelmaster's courses at a subsidized rate, and watched attrition rates dropas a result.For example, Cognizant Technology Solutions, an IT service firm with17,000 employees, partially reimburses Indian staff that pursuesmaster's degrees at BITS, a higher-education institution located inPilani, India. Business process outsourcing (BPO) player 24/7 Customer,in association with the Indian Institute of Management Bangalore,launched a managementeducation seminar series called "BeyondKnowledge," through which 24/7 aims to educate employees about theBPO industry and discuss related careers. Multiple providers havefollowed the lead of Cognizant and 24/7.In several offshore countries, advanced degrees are considered crucialto social standing. It's important for U.S. firms with little internationalexperience to recognize this desire among employees and designprograms accordingly.

 Change Locations The high prices and resource crunch in top-tier Indian cities such asBangalore and Mumbai have led many companies to executealternative location strategies. Many vendors are sending work to tier-two cities (Hyderabad or Chennai) or even tier-three cities (Noida orChandigarh), where labor and real estate costs as well as attrition maybe cut in half. Such benefits come at a price: The infrastructure qualitylags that of more advanced cities, and the search to find qualifiedpeople may take longer. _______________________________________________________________________ _ 24 Another option to combat the rising attrition rates in India is to locatein other countries. Sykes Enterprises, for example, disclosed that it isrelocating the customer contact management work at its Bangalore,India, facility because the center delivered an inadequate return and alimited competitive advantage. The Tampa-based company thinks thework is better suited for the other Asia-Pacific offshore centers in itsportfolio, such as China. Sykes expected to incur total charges of approximately $0.8$1.5 million for its plan to relocate work. Rotate Employees Employees who don't feel challenged by their work often leave. Inresponse, companies such as TCS have programs that rotateemployees into different disciplines about every two years and exposethem to new locations, projects, and technologies. L&T InfoTech, asoftware solutions provider with 4,000 employees and six developmentcenters in India, has implemented a similar program.Offshore employees are asking for a clear career path with increasedresponsibility and frequent recognition of achievement. EstablishedU.S. and European multinational companies have long had learningprograms that set expectations for performance goals such as learninga particular tool or proprietary software. Companies practicing off shoring need to provide new challenges and opportunities for skillsdevelopment through training or job rotation. It may become the onlyreason your best employees stay with you. Combat Poaching by Encouraging Referrals _______________________________________________________________________ _ 25 Rather than going through a prolonged posting process and screeninga deluge of rsums, some companies poach employees directly fromtheir competitors and offer to double salaries or buy out contracts onthe spot to scale up quickly. Poaching is generally a bad idea, as itdrives up salaries and discourages employee loyalty.An employee referral program can serve as an alternative andeffective recruiting strategy. Satisfied employees can be a company'sbest sales tool and add a personal touch that a print or radio campaignlacks. A Voice & Data survey of the top 15 Indian outsourcingcompanies with

1,000-plus employees found that referrals constituted23% of new hires. For some companies, the number was even higher,at 40%. The study also observed that recruits hired through employeereferral programs are "stickier"; that is, they stay with companieslonger than non-referrals. Just Ask: Are Your Employees Satisfied? Retention is inextricably linked to employee satisfaction, so it pays toperiodically survey employees hopefully before their exit interviewsabout job satisfaction issues, and act on the data gathered. The aimis to determine why some employees depart and some remain with thecompany, and to define the traits of productive, successful employees.Many companies examine the reasons employees leave, which don'treveal as much as the reasons they stay.An important aspect of implementing a retention program understandsthat it should not be one-size-fits-all. If incentives are meant to keepemployees happy, then they truly have to be designed with theemployee in mind. Too often, employers and employees disagree on _______________________________________________________________________ _ 26 what constitutes a good incentive. For example, a company mightreward a father with three young children a monetary bonus as thanksfor working overtime for five months straight. To the father, however,days off might have been more attractive, since they would haveallowed him to spend time with his family.Knowing your employees and personalizing rewards makes adifference. The global workforce has different, individualized needs,and organizations should tailor incentives for their employees if theywant to retain them. If your company doesn't bother, don't besurprised if workers head for the door as soon as year-end bonuses arehanded out or stock options vest. Spend More Time Recruiting With huge projects ramping up within exceedingly short windows, itcan be hard to convince management to allot more time to therecruiting process. However, it's difficult to retain good employees if the company doesn't have a process to hire the right people in the firstplace. Simple measures, such as incorporating skills tests that relatedirectly to the job in question, can help companies to determinewhether the applicant is indeed an expert programmer or merely anintermediate programmer. Having employees interview candidatesalso may increase the chances of success, as these employees canbetter identify potential personality clashes that HR personnel may notspot. Costs of Turnover The impact of employee turnover on company performance is oftenunderstated by organizations. This describes how the cost of turnover _______________________________________________________________________ _ 27

is can be calculated using some basic organizational parameters. Thepurpose of this document is to provide talent cost of turnovercalculator with insight into how costs are calculated and the reasonswhy certain costs were include or excluded form the calculator. Thecalculator should only be used as a guide in understanding the impactof turnover on a company. If the desire is to understand the true costof turnover then it is suggested that a greater degree of analyticalwork is undertaken. The key areas used in the calculation of turnover are:

Administration and sourcing costs These include the administration of the termination and recruitmentfunctions together with the costs associated with interviewing, testingand attracting applicants. New Hire costs Once a person has been employed an organization generally spendssignificant resources in the induction and administration of bringingthem into the organization. Lost productivity _______________________________________________________________________ _ 28 The hidden costs associated with lost productivity of employees priorto leaving the organization and new less skilled employees are one thelargest components of the total cost associated with turnover. Dysfunctional and avoidable turnover Determining the level of dysfunctional and avoidable attrition providesa perspective on the scope of control that a company has to managetheir turnover costs. Determining the cost of turnover is the first stepin the process of developing a management plan. To deal with anattrition issue effectively the reasons for turnover and anunderstanding of the demographics of turnover need to be understood.Undoubtedly, the financial costs of turnover have attracted theattention of academics and practitioners alike. Besides the morefamiliar costs associated with the administration of terminatedemployees the economic costs such as productivity losses need to beincluded in any calculation. In particular, departure of employees -especially experienced or talented ones - may threaten overall firmproductivity or client retention. Furthermore, personnel losses mayendanger the firms future opportunities in the marketplace or themorale of their remaining work force. Human resource accountingexperts Cascio, Hom and Griffeth define exit expenses as having twomain

components - direct and indirect costs. A company incurs bothdirect and indirect costs that result in losses in production dollars andoverall production volume, as well as increased administrative costs.Direct Costs are actual dollars spent each time an employer has toattract, select, and induct a replacement for an employee who leavesthe organization. Indirect costs are those expenditures attributable to _______________________________________________________________________ _ 29 turnovers affects on production - that is costs for incomplete ordisrupted work, loss of quality, etc. The cost of turnover can be calculated by measuring the time taken toadminister each activity plus the direct costs such as advertising costs. The turnover costs calculated using the calculator represent dollarsspent. The potential loss of revenue if these dollars were investedelsewhere or through lost productivity is not calculated. Therefore, thefigures are an indication of the minimum costs that the organization issubjected to when an individual leaves the company. Administration & Sourcing costs The most visible cost of turnover is incurred by organizations in thearea of recruitment administration and sourcing. The time associatedwith processing terminated employees and recruits places a burden onorganizations where staff turnover is excessively high. The assumptionis that this is largely an administrative task conducted by people at80% of the average company salary. In addition the direct costs to acompany for recruitment agency and advertising costs are highlytransparent. 1. Process Administration: Resignation Administration - The time taken to administer a resignation will include activitiessuch as: conducting exit interviews & processing of administrativetasks. The time taken to perform these activities is ideally measuredas a result of analyzing the processes involved. _______________________________________________________________________ _ 30 Recruitment Administration -A large amount of time is often spent in administering therecruitment process. Writing the job ad, posting it onto job boards,organizing agencies and reference checking all require the use of organizational resources, whether internal staff or outsourced. Thehours spent involved in these activities does need to be factoredinto the cost of turnover. 2. Sourcing Costs: Agency expenses - The cost of sourcing a successful applicant from an agency may beone of the largest single direct costs associated with recruitment.Advertising costs - The cost associated with posting job

ads to job boards or traditionalmedia such as newspapers can be significant. The average cost pervacancies is used within the calculation. 3. Interview Costs: Interview -A core component of recruitment administration is the costassociated with interviewing applicants. Interviews make useinternal resources. The more interviews held and the greater thenumber of candidates interviewed the larger the costs associatedwith these activities. Testing -Companies are making greater use of psychometric and aptitudetesting in their recruitment processes. These tests can be costly to _______________________________________________________________________ _ 31 administer and as such need to be factored into the overall attritioncosts. Travel -Companies may pay the costs associated with bringing an applicantto the interview location. Although this may not be done for everycandidate an average is used in the I4 calculator. Cost of New Hire The two costs measured in this area are the administrative tasksassociated with inducting a new hire into the organization and theassociated induction training. When measuring the cost of attritionsometimes the total cost of training that an individual has receivedwhilst in the employment of an organization is included. However, asall learning undertaken by employees will be used back on the job anadd value to the business it is inappropriate to count it as a cost of attrition. Also, where particular jobs have high training, often there is acorresponding lower rate of pay which acknowledges the investmentthat the organization is making in the individual, eg. Youth wages. Oneaspect of training directly associated with turnover, however, is theinduction of new staff to the organization. High staff turnover willnecessitate greater levels of resources being made available to inductnew employees. It is the opportunity costs of these resources thatmust also be calculated. 1.Induction Administration _______________________________________________________________________ _ 32 The process of induction into an organization can involve a substantialamount of time. The activities included here would include theprocessing of new hires into organization systems (HR) andintroductions to fellow employees.Induction Fixed Costs - The fixed costs associated with inductions include the cost of materials such as induction kits and staff manuals.Induction Training -Any initial training received by an employee on joining thecompany. This includes the costs of the materials, presentersand the opportunity costs associated with the new employeetaking time off work to participate.Relocation

Expenses -Similar to travel these cost are incurred by companies in aneffort to source the best talent for alternate locations. Anaverage cost needs to be captured as part of the calculationprocess. Productivity Losses The most detrimental aspect of staff turnover is lost productivity.Evidence has found that leavers often miss work or are tardy beforethey depart. Deery and Iverson argue that according to progression-ofwithdrawal models the productivity of leavers may deteriorate beforethey depart. _______________________________________________________________________ _ 33 Turnover is commonly viewed as belonging to a family of withdrawalbehaviors that physically distance employees from unpleasant worksettings. Serving a common psychology function, withdrawal actionsreduce the time spent in an adverse environment and thus reduce jobdissatisfaction.Studies have shown that employees leaving a company will have agreater level of absenteeism prior to leaving. Excessive sick leave isnot only costly, but is also an early warning signal that an individualmay be considering resigning from the organization. Not only doesstaff take more sick leave but Hom and Griffeth state that their overallproductivity decreases as well. Furthermore, resignations may disruptother employees work if their work depends on the leavers or theymust assume the leavers duties. The second effect of loss of productivity occurs when new hires join theorganization. They will not have the networks, understanding of organizational processes or product/service knowledge to be effective.Studies have shown that a new hire will generally take between 3- 8months to become effective in their new role. The longer period isassociated with more senior roles. Excluded costs Not all the costs associated with turnover have been included in the i4attrition calculator. Costs that cannot be accurately measured orassumed have been excluded. These costs, although hidden, may bethe most critical in terms of organizational impact. Examples of hiddencosts are included below to highlight the organizational impact of attrition. _______________________________________________________________________ _ 34 Employee Demoralization Turnover may erode the morale and stability of those who remainemployed. Their morale suffers because they lose friends and mayinterpret motives for quitting as social criticisms about the job. A belief that a leaver has a better job elsewhere may change employeesperceptions of their jobs. As a result stayers may denigrate theirpresent position in the light of superior alternatives and begincontemplating other employment. This phenomenon may lead to acycle of attrition whereby employees leaving a company prompt otherto do the same.

 Impaired Quality of Service Turnover also hinders the delivery of service and retention of customers. Attrition among service personnel impairs customer servicebecause understaffed branches delay or withhold service. Unlikeexperienced leavers, new employees may also provide less competentor less personalized service because they do not know the clients andcant meet customer expectations through lack of knowledge andexperience. If satisfied employees make customers feel well treated, disgruntledemployees may provide careless service before they leave. Turnoveralso interrupts the transmission of service values and norms, which arethe essential underpinnings of high quality service, to successivegenerations of employees. Customers' perceptions, attitudes andintentions seem to be affected by what employees experience, both intheir specific role of service employees and their more general role of organizational employees. It has been found that there is a high _______________________________________________________________________ _ 35 correlation between employee turnover and customer turnover. Therefore, the cost of decreased customer satisfaction and loyaltyshould be taken into account when considering staff turnover. Turnover reason & cost impact Just as attrition can lower productivity, incur financial costs, andundermine stayers' morale, turnover can have the oppositeramifications under certain circumstances or for certain firms. That isthat the exit of marginal performers may improve overall firmproductivity, while new replacements for leavers can infusecompanies with new ideas and technology. Though turnover isobviously costly, personnel shrinkage - especially amongadministrative staff - can nonetheless reduce overhead costs. Furtherresignations may create more job and empowerment opportunities foremployees who remain in firms. Functional and Dysfunctional Turnover Departing from conventional beliefs, some academics point out thatturnover can prevent stagnation and complacency, facilitate changeand innovation, and displace poor performers. Turnover is notinherently negative. Although it creates personnel costs, theorganizational consequences of turnover are dependent on who leavesand who stays. The departure of good performers is construed asdysfunctional turnover - representing a loss to the organization - fortheir replacements are likely to be of lower caliber. The departure of poor performers is viewed as functional turnover - because they areapt to be replaced by better performers. Research into whether highperformers or low performers leave tends to have found mixed results.

_______________________________________________________________________ _ 36 A meta-analysis conducted by McEvoy and Cascio found that generallyit is the poor performers that will leave their place of work. There aretwo possible explanations for this: firstly, terminated staff has onaverage a lower tenure than current staff and so have not had the timeor opportunity to develop the skills necessary to perform well; or thecurrent performance management systems which exist areencouraging high performers to stay and poor performers to quit. Avoidable and Unavoidable Further differentiation should occur between organizationally avoidableturnover and organizationally unavoidable turnover. For example,organizations cannot control (that is, it is unavoidable) turnover causedby an employees death, or by an employees quitting to follow arelocating spouse. It is important to identify carefully those exits thatare avoidable and those that are unavoidable. After all, leavers whosedepartures are unavoidable resemble stayers more than they resemblethe leavers whose departure is avoidable; they do not resign becausethey are unhappy with their jobs or the organization.Despite the appeal, determining whether exits are avoidable orunavoidable may prove difficult because employees may falsify reportsof their reasons for leaving, they may not wish to burn their bridgesbehind them. The cost of attrition is only calculated on the level of avoidableturnover. There is no benefit in including the cost of unavoidableturnover since a company has no control over these events and cantherefore not put in place action plans to minimize the negativeconsequences of staff turnover. _______________________________________________________________________ _ 37 Article -Attrition at Call Canters The evolving BPO industry has got the perplexing issue of managing human resources, says BHIMA RAO Attrition of employees in the call centre industry is mind-boggling andit is creating havoc for the industry and especially for the HRdepartment. The attrition rate varies from minimum 30 per cent to amaximum 90 per cent per annum. The software also saw this rate tillthe incident of September 11, 2001. I wonder why the attrition ratewas not so high in any other new industry like telecom, retail stores,banking etc. Who has to introspect, how much responsibility should be _______________________________________________________________________ _ 38 borne and are we collectively contributing directly or indirectly for theattrition.Attrition is not a new problem and it has existed earlier and willcontinue to exist in any industry. But there is a limit for every thing. The call center industry is new and every one is in a great hurry tomake some thing or do some thing, become someone in the sun riseindustry. The government, promoters, management team, employees,consultants, media and so many others play a major role in developingany new industry and

extend helping hand for stabilization and finallygrowth of the industry.Our country is fortunate to be identified as one of the best places forBPO and the beginning is really good. Now the growth of BPO industryis mainly depending on the cost effectiveness and quality of themanpower. All other factors are being taken care by the governmentthrough liberalized laws, providing infrastructure like telecom and weare best in the IT. The cost effectiveness will depend mainly oncontrolling the running cost and quality is dependent on the manpoweremployed. Attrition of employees increases the cost of recruitment andtraining. It has impact on maintaining the quality and competentmanpower to meet the standards set by international customers. Four reasons why youngsters quit BPOs What drives young people to quit call centres and data processingunits as fast as they join them? As industry attrition rates (how soonpeople quit jobs) climb as high as 80 percent in some companies,human resource executives in various BPO firms tried to pinpoint thereasons that make young people between the ages of 22 and 26 _______________________________________________________________________ _ 39 shuffle jobs in months. They were participating in a seminar on key HRissues for the BPO industry in Bangalore today. This is what they cameup with. 1.BPO not seen a long term career "This industry is still not being accepted for a long term career," saidMphasis BPO Services' chief human resources officer Manab Bose. 2.High aspirations that the industry cannot meet BPO employees have high aspirations. They want to see 'wealth' in thislifetime and have low respect for authority. This is because most BPOemployees have immense family support. 3.Good talent is prone to poaching ICICI OneSource President and CEO Raju Bhatnagar said the pulls of the market (poaching by competitors) cannot be countered easily. BPOfirms try to pick the best talent, he explained, and good talent is proneto be poached or to shifting jobs. He suggested that firms shouldinstead look at the average person, train and retain him/ her for thelonger haul. 4.Employees face pressure at home and at work Philips Software CEO Bob Hoekstra felt BPO employees are in a piquantsituation, having to handle pressure both from their customers and athome. _______________________________________________________________________ _ 40

"There is an enormous conflict in age group [ in terms of the fact that ]youngsters are serving mature customers, and they are prone to makemistakes," he said. Case Study -'I'll never work at a call centre again!'Subhash Mukherjee | November 18, 2004 The BPO/ITES sector is only expected to grow larger, and moreprofitable, over the next few years. Most young people are eager to jump on the money-making BPO bandwagon. _______________________________________________________________________ _ 41 But is working for a BPO all that it's made out to be?No, says Subhash Mukherjee (name changed on request), whorecently quit his job at a call centre. This, in his own words, is his story:I am 20 years old. I was recently hired by a call centre in Kolkata towork for an overseas-based company. I was earning Rs 7,500 permonth.My workday began with calls I had to answer for five hourscontinuously, without a break. As soon as I was through with one call,the next one would be waiting. There was no time for me to even say afew words to the person sitting next to me. After five hours of constantly answering calls, I would get a 20-minute break. Then, Iwould take calls again for another three hours. Without a break. Iwould take around 350 calls a day.One day, I reached breaking point. After taking 156 calls at a stretch,my throat started to hurt terribly. I paused to take a breath and, in theprocess, I missed a call. The calls that are directed to us wereconstantly monitored by a machine. Immediately, it alerted mysupervisor to the fact that I had missed a call. My supervisor came andasked me why I was in the 'wrap mode'.What this means is that my dialer shows a red bar when the person onthe other end of the line hangs up without getting a response. The redbar is an indication that I did not take the call -- that the call was not'live'. At that moment, I just wanted to pick up my bag and leave. _______________________________________________________________________ _ 42 Permanently. Instead, I stayed calm for the duration of my hours atwork.I fielded all my calls till 1 am. But I had made up my mind -- I wouldquit this job with its inhuman pressures and its lack of empathy foremployees. Workplaces like this have only one goal -- to make money. This job expects you to work even if you are feeling ill; even if yourthroat hurts. You cannot take even a 10-second break; the dialerthrows calls at you continuously and you have to start pitching (takingthem) immediately. If you do not respond to the person at the otherend of the line, s/he might hang up. That shows on your machine. Youhave to ask for permission to go to the toilet. Often, your request isdenied by your supervisor. You repeat the same five sentences 350 times a day. Isn't it pathetic?When I started out, there was no pressure. Gradually, though, thestress grew beyond the levels of human tolerance. Working at the callcentre was a great learning experience for me. Now, it was time for abreak. When I worked, I had no

time to watch a film, no time to read abook, no time to meet friends, no time to swim. For the last fewmonths that I worked at the call centre, I had time only for two meals aday. As a result, I lost my appetite. I would return home at 2.30 am andgo to sleep at 4 am. I would get up at noon and go back to work at3.30 pm. Now that I have quit, I can go out with my friends. I canspend time rediscovering myself. With the approximately Rs 65 perhour that I made, I can buy a few books and have some fun. Maybethat will take away the pain that came with this job. But, believe me;the money could in no way make up for the pain! _______________________________________________________________________ _ 43

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